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The BBands for RSI indicator is a full-fledged trading strategy, the calculations of which are based on the interaction of forex indicators included in its standard set, namely Bollinger Bands and RSI using smoothing. Its calculations are aimed at determining the direction of the current trend and finding the optimal moment to open a trade during this period. It is presented in the lower window of the price chart in the form of a channel consisting of three lines: two channel boundaries and an RSI middle line, in addition, the indicator window also has arrows that change color and direction under certain market conditions, as well as signal levels. Using the current values of the indicator, the trend is first determined, taking into account which, in turn, a trade is opened.
The indicator is suitable for trading on any timeframe, with any currency pairs.
Input parameters
There are several sections in the settings of the BBands for RSI indicator, each of which affects its overall functioning. The Input parameters section is used to change its technical operation, the Colors section is used to visualize it, and to add signal levels, the Levels section is used.
-RSI Period - value of the period of the RSI indicator. The default value is 14.
-Max signal level - the maximum value of the signal level of the indicator. The default value is 70.
-Min signal level - signal level of the indicator with a minimum value. The default value is 30.
-RSI color - The color to apply to the RSI line. Default is DodgerBlue.
-RSI width - width of the RSI indicator line. The default value is 1.
-BB Period - calculation period of the BBands indicator. The default value is 80.
-BB Deviation - the current deviation of the indicator values from the standard. The default value is 2.0.
-BB Color - the color of the BBands indicator lines. The default value is Green.
-BB Width - the thickness of the lines of the BBands indicator. The default value is 1.
-BB line style - visualization type of BBands indicator lines. Default value is Dot.
-Candle which look for the signal (0+current candle) - parameter for using a candle as a signal. The default value is 1.
-Show vertical lines - option to have vertical lines in the indicator window. Default value is false.
-Show arrows - the parameter for the presence of arrows in the indicator window. The default value is true.
Indicator signals
To open a certain trade, the current trend is determined using the BBands for RSI indicator. To do this, one should take into account the general direction of its lines and their location relative to the signal levels 30,50 and 70. And the moment of opening a position is determined taking into account the appearance of a certain arrow in the indicator window. If the current trend is upward, buy trades are opened, with a downward trend, sell trades. If the direction of the current trend changes, the trade should be closed.
Signal for Buy trades:
- The indicator lines are moving up. The middle line of the indicator is moving up from level 30, crossing level 50. An upward arrow is formed above the line.
Upon receipt of such conditions, a long position can be opened on the signal candle. At this moment, an upward trend is determined in the market. When the current trend changes, namely at the moment of the appearance of the next arrow, the current trade should be closed and a new one should be considered.
Signal for Sell trades:
- The channel of the indicator lines goes down. The RSI line goes down from level 70 to level 50. An arrow is formed in the indicator window, pointing down.
If there is a downward trend, confirmed by such conditions of the indicator, a sell trade can be opened. Upon receipt of reverse conditions from the indicator, that is, at the moment the current trend changes, the trade should be closed. At this moment, the opening of new trades is considered.
Conclusion
The BBands for RSI indicator is a very easy-to-use, yet effective trading algorithm based on the functioning of indicators, the accuracy of which has been proven over time. Before using the indicator on a real deposit, it is recommended to practice on a demo account.
